Tax Law Commons^™

Tax Consequences When A New Employer Bears The Cost Of The Employee's Terminating A Prior Employment Relationship, Douglas A. Kahn, Jeffrey H. Kahn

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The next few months will be busy ones for moving companies that have NCAA basketball coaches as customers. In the past few months, several men's college basketball coaches have accepted jobs at different schools. Several of those coaches, who were still under contract at their former institution, had buy out provisions that allowed them to terminate their relationship for a set price. John Beilein is a prominent example of this since his buy out price was so high. Last season, Beilein was the head basketball coach at West Virginia University where he was under contract with the school until 2012. …

Stapled Securities--"The Next Big Thing" For Income Trusts? Useful Lessons From The Us Experience With Stapled Shares, Reuven S. Avi-Yonah, Tim Edgar, Fadi Shaheen

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The Department of Finance has introduced two separate sets of legislation that together attempt to limit demand in the income trust market (though with very different revenue consequences). However, neither the proposed legislation nor the existing Income Tax Act contains an equity recharacterization rule. Consequently, the tax results associated with the standard income trust and royalty trust structures can still be realized with direct holding structures, in which the use of a trust as a pooling mechanism is eliminated and investors hold directly a combination of high-yield junk debt and a specified number of shares of the issuer. Until now, …

Tax Competition, Tax Arbitrage And The International Tax Regime, Reuven S. Avi-Yonah

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In the past ten years, I have argued repeatedly that a coherent international tax regime exists, embodied both in the tax treaty network and in domestic laws, and that it forms a significant part of international law (both treaty-based and customary). The practical implication is that countries are not free to adopt any international tax rules they please, but rather operate in the context of the regime, which changes in the same ways international law changes over time. Thus, unilateral action is possible, but is also restricted, and countries are generally reluctant to take unilateral actions that violate the basic …

The Incoherence Of Dormant Commerce Clause Nondiscrimination: A Rejoinder To Professor Denning, Edward A. Zelinsky

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A sound intuition animates Professor Denning's defense of the doctrinal status quo under the dormant commerce clause: the courts should not lightly abandon well-established constitutional canons. I nevertheless remain unconvinced by Professor Denning's effort to justify the long-standing interpretation of the dormant commerce clause as forbidding taxes which discriminate against interstate commerce. Whatever the historical justification for this constitutional precept, its past utility, or its visceral appeal, dormant commerce clause nondiscrimination is today doctrinally incoherent in tax contexts. The problem is not one of borderlines and close cases. Rather, at its core, the notion of dormant commerce clause tax nondiscrimination …

The Three Goals Of Taxation, Reuven S. Avi-Yonah

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The current debate in the United States about whether the income tax should be replaced with a consumption tax has been waged on the traditional grounds for evaluating tax policy: efficiency, equity, and administrability. For example, Joseph Bankman and David Weisbach recently argued for the superiority of an ideal consumption tax over an ideal income tax on three grounds: First, that the consumption tax is more efficient because it does not discriminate between current and future consumption,' while both income and consumption taxes have identical effect on work effort. Second, that the consumption tax is at least as good at …

Comparative Fiscal Federalism: What Can The U.S. Supreme Court And The European Court Of Justice Learn From Each Other's Tax Jurisprudence?, Reuven S. Avi-Yonah

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In October 2005, a group of distinguished tax experts from the European Union and the United States, who had never met before, convened at the University of Michigan Law School for a conference on "Comparative Fiscal Federalism: Comparing the U.S. Supreme Court and European Court of Justice Tax Jurisprudence." The purpose of the conference was to shed comparative light on the very different approaches taken by the European Court of Justice (ECJ) and the U.S. Supreme Court to the question of fiscal federalism. The conference was sponsored by the U-M Law School, U-M's European Union Center, and Harvard Law School's …

The Report Of The President's Advisory Panel On Federal Tax Reform: A Critical Assessment And A Proposal, Reuven S. Avi-Yonah

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ON November 1, 2005, The President's Advisory Panel on Federal Tax Reform ("Panel") submitted its report ("Report") to the Secretary of the Treasury.1 At 272 pages, this is the most important and wide-ranging plan to reform the United States federal tax system since Blueprints for Basic Tax Reform (1977).2 While prospects for immediate action appear dim, the Report will no doubt be the basis of discussion of federal tax reform for a long time to come.

Is The Report Of Lazarus's Death Premature? A Reply To Cameron And Postlewaite, Douglas A. Kahn

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Over a year ago, Ms. Faith Cuenin and I wrote an article in this Review (which I hereafter refer to as the "2004 Article") about the tax treatment of guaranteed payments under section 707(c) that are made in kind.' We concluded that a partnership does not recognize gain or loss on the making of a guaranteed payment with appreciated or depreciated property. We also concluded that the partner's basis in the property received will equal its fair market value at the time of payment, and that the payment does not affect the partner's outside basis in his partnership interest except …

Prevention Of Double Deductions Of A Single Loss: Solutions In Search Of A Problem, Douglas A. Kahn, Jeffrey H. Kahn

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In the current tax system, a corporation is treated as a separate taxable entity. This tax system is sometimes referred to as an entity tax or a double tax system. Since a corporation is a separate and distinct entity from its owners, the shareholders, the default rule is that transfers between them are treated as realization events. Without a specific Internal Revenue Code (Code) provision providing otherwise, such transactions will also require the parties to recognize the realized gain or loss. Congress has enacted several nonrecognition corporate provisions when forcing the recognition of income could prevent changes to the form …

Cuno: The Property Tax Issue, Edward A. Zelinsky

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The author criticizes the decision of the U.S. Court of Appeals for the Sixth Circuit in Cuno v. Daimler Chrysler Inc., in which the court ruled that Ohio's investment tax credit violated the U.S. Constitution's Commerce Clause. Zelinsky says the dormant Commerce Clause concept of nondiscrimination is overbroad and undefinable and should be abandoned. He hopes this decision will give the U.S. Supreme Court an opportunity to reassess the concept.

Giving Intellectual Property, Xuan-Thao Nguyen, Jeffrey A. Maine

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The interdisciplinarity of intellectual property and taxation poses many challenges to the disparate existing norms in each respective field of law. This Article identifies and critiques the current tax regime governing the giving of intellectual property as a manifestation of the failure to understand the principles and policies underlying intellectual property and the firm. It proposes an economic, incentives-based system that would encourage firms to extricate part of their repository of residual rights by surrendering their monopolistic ownership of intellectual property for the benefit of charitable organizations and, in turn, the development and growth of society.

The Future Of The Dormant Commerce Clause: Abolishing The Prohibition On Discriminatory Taxation, Edward A. Zelinsky, Brannon P. Denning

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Professor Edward A. Zelinsky, of the Cardozo School of Law, argues that "[i] t is time to abolish the dormant Commence Clause prohibition on discriminatory taxation." This is so, he writes, because "the prohibition is today doctrinally incoherent and politically unnecessary." The incoherence, Zelinsky maintains, stems from the disparate treatment by the United States Supreme Court of economically identical activities: "discriminatory taxation favoring local industries," which the doctrine prohibits, and "direct expenditures subsidizing those same industries," which it permits. It is unnecessary, Zelinsky argues, because Congress is able, and better suited, to police any state abuses. In short, "[l]ike a …

Do Tax Expenditures Create Framing Effects? Volunteer Firefighters, Property Tax Exemptions, And The Paradox Of Tax Expenditure Analysis, Edward A. Zelinsky

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No abstract provided.

Holding Intellectual Property, Xuan-Thao Nguyen

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The collapse of WorldCom, Inc., exposed a complex web of accounting irregularities. Within that web, recent filings by Dick Thornburgh, WorldCom's Bankruptcy Court Examiner, reveal a different type of scheme that involves the holding of intellectual property. Further scrutinizing the scheme reveals that WorldCom and its tax advisors, KPMG Peat Marwick LLP (KPMG), devised a tax avoidance scheme through the creation of an intellectual property holding company (IP holding company). This type of scheme has been widely and quietly utilized in the last twenty years by many corporations with substantial intellectual property.

Indeed, as state taxing authorities have become more …

All Of A Piece Throughout: The Four Ages Of U.S. International Taxation, Reuven S. Avi-Yonah

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This paper divides up the history of U.S. international taxation into four periods, on the basis of what was the basic theoretical principle underlying the major legislative enactments made in each period. The first period lasted from the adoption of the Foreign Tax Credit in 1918 to the end of the Eisenhower Administration, and was dominated by the concept of the right to tax as flowing from benefits conferred by the taxing state. The second period lasted from 1960 until the end of the Carter Administration, and was dominated by the concept of capital export neutrality and an emphasis on …

Tax Law Uncertainty And The Role Of Tax Insurance, Kyle D. Logue

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In the broadest sense, this is an article about legal or regulatory uncertainty and the role that private and public insurance can play in managing it. More narrowly, the article is about tax law enforcement and the familiar if ill-defined distinctions between tax evasion, tax avoidance, and abusive tax avoidance. Most specifically, the article is about a new type of tax risk insurance policy, sometimes called tax indemnity insurance or transactional tax risk insurance that provides coverage against the risk that the Internal Revenue Service (Service) will disallow a taxpayer-insured's tax treatment of a particular transaction. The question is whether …

The Ingenious Kerry Tax Plan, Reuven S. Avi-Yonah

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The tax plan proposed by Democratic presidential candidate John Kerry at Wayne State University on March 26 is an ingenious set of ideas to encourage domestic job creation. Its greatest strength, however, may be its contribution to long-term economic growth, fairness, and tax law simplification. In this article I will first describe the Kerry proposal, then analyze its advantages, and finally address some counterarguments.

Taxing The New Intellectual Property Right, Xuan-Thao Nguyen, Jeffrey A. Maine

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Current, albeit arbitrary, rules exist governing the tax treatment of traditional forms of intellectual property, such as patents, trade secrets, copyrights, trademarks, and trade names. While tax principles exist for these traditional intellectual property and intangible rights, specific tax rules do not exist for new intellectual property rights, such as domain names, that are emerging with the arrival of global electronic commerce transactions on the Internet. This article explores the proper tax treatment of domain name registration and acquisition costs, addressing these parallel questions? Are domain names merely variations of traditional forms of intellectual property and other intangible rights to …

Corporations, Society, And The State: A Defense Of The Corporate Tax, Reuven S. Avi-Yonah

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Corporations are both everywhere and nowhere. They are everywhere, first and foremost, on the economic scene: a large percentage of economic activity in the United States is effectuated through the corporate form. But the reach of corporations is far broader than that. Many of our other institutions, including universities, churches, hospitals, and other non-profit organizations, are in corporate form. Other salient features of our society, such as representative democracy, originated from the use of the corporate form in medieval England. Even the idea of the state itself originated in Roman and Medieval legal notions about corporate bodies.

Bridging The North/South Divide: International Redistribution And Tax Competition, Reuven S. Avi-Yonah

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The most important social problem facing humanity at the beginning of the 21st century is the yawning divide in standards of living between the rich nations of the global North and the poor nations of the global South. The following table gives some indicia of the current gap in living standards. It shows that the majority of the population in most developing countries lives on less than two dollars a day; that in some developing countries, over a quarter of children aged 10-14 are employed in the work force; that mortality for children under five in developing countries can be …

Revisiting The Roles Of Legal Rules And Tax Rules In Income Redistribution: A Response To Kaplow & Shavell, Ronen Avraham, David Fortus, Kyle D. Logue

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The debate over whether legal rules should be used to redistribute resources in society or whether redistribution should be left exclusively to the tax-and-transfer system has long occupied philosophers, political theorists, economists, and legal academicians. For many years, the conventional wisdom on this question among legal scholars seemed to be that blanket generalizations were inappropriate. All systems of redistribution distort individuals' choices and entail administrative costs. Therefore, the argument went, a universal preference for using the tax-and-transfer system to redistribute is not justified. Rather, the choice among institutions to accomplish society's redistributive goals was considered to be "an empirical one …

Reparations As Redistribution, Kyle D. Logue

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The most controversial, and most intriguing, remedy sought by proponents of slavery reparations involves massive redistribution of wealth from whites to blacks within the United States. This is not to say that reparations proponents have focused only on racial redistribution. Some have called for an official apology from the U.S. government. Others seek the creation of a foundation or institute, funded by U.S. tax dollars, to be devoted to furthering the interests of African Americans, including the funding of K- 12 educational programs for black children and the funding of general civil rights advocacy to counteract the lingering effects of …

Sensible Tax Policies In Open Economics, James R. Hines Jr.

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This paper evaluates the design and the desirability of business taxes in small open economies, in light of evidence of the impact of taxation on the activities of multinational firms. The high degree of international capital mobility implies that small countries benefit by reducing their tax rates below the rates of other countries with whom they compete, possibly to the point of eliminating any taxes on inbound investment. Countries likewise have incentives not to tax the foreign incomes of resident companies. Host countries that are tempted to use their tax systems to subsidize and thereby encourage local employment, net exports, …

The Case For Retaining The Corporate Amt, Reuven S. Avi-Yonah

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PROFESSORS Chorvat and Knoll present us with a strong argument for repealing the corporate alternative minimum tax (AMT). In 2001, repeal was recommended by the Joint Committee on Taxation as part of their simplification study, endorsed by the ABA/AICPA/TEI tax simplification project, and included in a bill passed by the House of Representatives. Since this issue is likely to arise again, it seems worthwhile to review the arguments raised by Chorvat and Knoll. Upon review, none of these arguments seem particularly persuasive; at best, they make a case for reforming the corporate AMT, not for repealing it. On the other …

Legal Transitions, Rational Expectations, And Legal Progress, Kyle D. Logue

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In the literature on legal transitions, the term "transition policy" is generally understood to mean a rule or norm that influences policymakers' decisions concerning the extent to which legal change should be accompanied by transition relief, whether in the form of grandfathering or phase-ins or direct compensation. Legal change within this literature is defined broadly, and somewhat counter-intuitively, to include any resolution of the uncertainty regarding what the law will be in the future or how the law will be applied to future circumstances. Thus, a legal change would obviously include an unexpected repeal of a tax provision, such as …

Redistributing Optimally: Of Tax Rules, Legal Rules, And Insurance, Kyle D. Logue, Ronen Avraham

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From the beginning of the law and economics movement, normative legal economists have focused almost exclusively on evaluating the efficiency of alternative legal rules. The distributional consequences of legal rules, therefore, have largely been ignored. It is tempting to conclude that legal economists are hostile or indifferent to concerns of distributional fairness. In fact, however, the discipline of economics has a great deal to say about distributional policy. The normative branch of economics, known as welfare economics, has always been deeply concerned with distributional issues. It is not that welfare economists purport to know a priori the "right" or "optimal" …

Gifts, Gafts And Gefts: The Income Tax Definition And Treatment Of Private And Charitable 'Gifts' And A Principled Policy Justification For The Exclusion Of Gifts From Income, Douglas A. Kahn, Jeffrey H. Kahn

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Gifts have been given special treatment by the income tax laws since the first post-16th Amendment tax statute was adopted in 1913. The determination of how the income tax law should treat gifts raises a number of issues. For example: should gifts be given special treatment? If so, what should qualify as a gift? Should gifts to a private party be taxable to the donee? Should gifts to a private party be deductible by the donor? Should the donee's basis in a gift of property be determined by reference to the basis that the donor had, and should any modifications …

Targeting Exemption For Charitable Efficiency: Designing A Nondiversion Constraint, Frances R. Hill

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No abstract provided.

Back To The 1930s? The Shaky Case For Exempting Dividends, Reuven S. Avi-Yonah

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This article is based in part on the author’s U.S. Branch Report for Subject I of the 2003 Annual Congress of the International Fiscal Association, to be held next year in Sydney, Australia (forthcoming in Cahiers de droit fiscal international, 2003). He would like to thank Emil Sunley for his helpful comments on that earlier version, and Steve Bank, Michael Barr, David Bradford, Michael Graetz, and David Hasen for comments on this version. Special thanks are due to Yoram Keinan for his meticulous work on the EU regimes (see Appendix). All errors are the author’s. In this report, Prof. Avi-Yonah …

Restoring Politics To The Commerce Clause: The Case For Abandoning The Dormant Commerce Clause Prohibition Of Discriminatory Taxation, Edward A. Zelinsky

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No abstract provided.